Simple salary - minimum required paperwork?

Question

Hello

For a small company, 2002-2003, one director is paid a salary below the personal income limit (£4615?) for that year. This is the director's only income.

The other director is paid ca. £2000 salary which takes them above their personal income limit for that year, as they have other (employee) income which already takes them to just above the personal income limit (as above - £4615 for 02-03 I think).

Question 1: What is the minimum paperwork, in terms of IRD forms, etc., that is required to process these salary payments?

Question 2: Tax details for the year concerned have already been lodged with IRD. Wanting to be 100% honest but weary of being put through the wringer, hat would be the best way to approach correcting the tax affairs of both directors with IRD?

Neither director has submitted a self-assessment return for 02-03 as the above salaries were not decided upon until recently. This is the first time the company has paid any salaries.

Your comments greatly appreciated!

SE

Peter Saxton · Accepted Answer

Why have you "decided" their salaries now instead of before 6 April

2003?

Your salaries details for 2002-2003 should have been declared months ago!

I don't understand how you mean that tax details have already been lodged with "IRD" (Inland Revenue?) yet you also say that the salaries were not decided until recently.

Why don't you pay and declare salaries the usual way?

sunny edinburgh · Answer

Thank you Peter for your thoughts.

Instead of "decided upon" I should have written "realised"! There is no concealment going on here.

Yes IRD=Inland Revenue.

Both directors have been through the 02-03 year with IR so these salaries would be a revision of the current tax position for that year.

SE

Doug Ramage · Answer

Normally, salaries are taxed when "paid" -  which could mean 2003-04.

Peter Saxton · Answer

Given the circumstances I would suggest you should give up on 2002-2003 now and review your directors' tax positions and make a decision for 2003-2004 before the end of the tax year.

sunny edinburgh · Answer

They nearly were (Dec 2002).

Still wondering about how the IR will see the revision of figures, given that there is tax to pay (probably 10% on under £2000) and the situation is the result of an oversight rather than dishonesty.

SE

sunny edinburgh · Answer

Give up? That sounds nice! (no offense intended).

Taxman: Where are your accounts/is your tax for 2002-03? Honest citizen: Oh, it was all too complicated, so I gave up! Taxman: Oh, ok.

:-)

Do you mean roll over the amount from 2002-03 to 2003-04?

SE

Ronald Raygun · Answer

Did you not say you *had already* submitted accounts for 02/03, and were now considering changing them because you forgot to include a payment of salary in them which wasn't in fact even made until well into 03/04? It's already rolled over by default.  I think he means not to bother rolling it back again, i.e. changing documented history to reflect what real history should have been but in fact wasn't. Just let history lie, excuse the pun, and don't bother carrying *back* the payments to when they should have been made, and just treat them as made when they were actually made.

sunny edinburgh · Answer

No company accounts submitted yet. Yes your assumption is correct. Much clearer. I see. That may be the best solution. Thanks RR for taking the time to post. SE

Peter Saxton · Answer

Thanks, Ronald. I think I can come on here and grunt and when people ask what I'm talking about I'm sure you'd be able to pop up and explain it properly to them!

Simple salary - minimum required paperwork?

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